Tag: Laws & Regs

Global Threat Assessment
by John Cusack

Despite the limitations presented in estimating criminal activity designed to be hidden, the results in the Global Threat Assessment present a bleak picture.

Criminal markets are generating more illicit funds than at any other time in our history, with ever more harmful effects inflicted against every Country, against billions of people and against our increasingly fragile environment.

We are witnessing the transformation of organised crime into very big business, leveraging networks to connect criminal actors, adopting poly criminality, embracing new cyber tools and opportunities afforded by the transformation to digital.

How big, which Countries, by what Methods and by which Gangs, is summarised in this Global Threat Assessment, using over 100 publicly available studies or reports from credible sources, together with personal observations and recommendations from the author.

In this Interview with the Hong Kong Monetary Authority’s Stewart McGlynn, who leads the Regulators Anti Money Laundering Team, Financial Crime News wanted to know more about HK, the risks and threats, de risking, the recent FATF Report, follow up actions, Regtech, PPP and much more besides. The interview reveals that HK has achieved a lot but also has plans to do more, much of which is exciting and offers the prospects for increased efficiency and effectiveness in fighting financial crime.

FCN: HK is one of the largest and most respected international financial and trading centres, but what attributes do you think are necessary to build and maintain this reputation?

SM: There are several key attributes which overlap to some degree and which can be related directly to anti-money laundering work.

This is an extract from FCN’s Global Threat Assessment, coming soon, which can now be pre ordered by contacting Financial Crime News. It is also featured in FCN Issue 3 which is freely available at the end of September, 2019.

In providing guidance in 2018, FATF described Securities Markets as “char...

Whilst utilities have been widely predicted as a future staple in the fighting financial crime ecosystem, many have tried and few succeeded in establishing platforms to make the KYC on-boarding and periodic review processes more efficient, secure and reliable. An exception is SWiFT’s KYC Registry established in 2014, it has grown and is already a trusted repository for important KYC information on Bank’s which is leading it to now look to the Corporate market too. In this interview Bart Claeys talks to Financial Crime News about SWIFT’s KYC Registry, what it does, why it’s important and what’s next?

FCN: What is the SWIFT KYC Registry and why is it important?

BC: SWIFT has spent decades facilitating the smooth flow of cross-border payment services, which today also requires parties involved to trust and verify their direct partners in the payment chain and so it’s natural for SWIFT to play a role as a trusted intermediary for financial institutions to both file and receive information to help conduct KYC enquiries.

Since its inception, the Wolfsberg Group has developed frameworks and guidance for the management of financial crime risks and arguably few have had as big an impact as the Wolfsberg AML Questionnaire. Alan Ketley is the Chair of the Wolfsberg Group’s Standing Committee on the CBDDQ and sat down with Financial Crime News to explain the genesis to its publication and provide an update on progress. Alan Ketley is the Head of Global AML Advisory at MUFG Bank based in New York.

FCN: When was the first correspondent banking due diligence questionnaire published by the Wolfsberg Group?

AK: It was first published in 2004 and was the first attempt to standardise the Correspondent Banking due diligence processes. The questionnaire was originally designed to be used for correspondent banking (using Wolfsberg’s definition) relationships but over time came to be used far beyond its original purpose and by/for various types of financial institutions.

As promised Malcolm Wright provides an update to Financial Crime News on the Crypto Industry’s response to the challenge laid down by FATF to adopt wire transfer standards, in this follow on from his June piece “Crypto asks for more Effective Regulation,” and after the v20 Summit held last week.

On 28 and 29 June 2019, the crypto industry met in Osaka, Japan on the sidelines of the G20 to discuss how it would find an appropriate response to the newly released FATF Recommendations for AML governance of the crypto industry. The discussion focussed on how the industry could implement a solution to fulfil wire transfer requirements that exist already in the traditional banking sector. Helpfully, just one week earlier the FATF released Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers that provided clarification and direction for Virtual Asset Service Providers, or VASPs as well as countries and the traditional financial sector.

In February 2019, FATF issued its proposed recommendations for AML governance of the crypto industry. Under pressure from the international community, the FATF aimed to bring amendments to Recommendation 15 (New Technologies) into force at the June 2019 plenary. Within the proposals, one point was opened for consultation; colloquially known as 7(b) the proposal seeks to introduce wire transfer recommendations required of the traditional banking sector into the crypto industry. That is, originator and beneficiary information is collected, screened and transmitted between correspondent institutions with the objective to prevent criminals and terrorists having unfettered access to the financial system.

The crypto industry responded but not for the reason many thought; the response was not to fight against regulation or kick the can down the road for another day but to make sure that the regulation could be effective.

Virtual Currencies (VC) have come a long way in the 10 years since Bitcoin first emerged, born out of the financial crises and now a decade later they are considered part of the financial landscape. With more than 1,000 VC’s to choose from, tens of millions of customers use VC whether as a store of value, unit of account and/or as a payment medium. As with any currency, there are those minorities that use it to further illicit acts. Criminals have recognised that VC has unique properties that could potentially serve their interests in laundering illicit funds and evading law enforcement. Users of VC employ pseudonyms rather than names, funds can be transferred without intermediaries and across international borders as easily as sending email.

Whilst the term “organised crime” appears to have emerged in Chicago in 1919, the phenomenon of organised criminal activity far pre-dates this and its manifestations have developed considerably since that time. Examples include “thugs” or gangs of criminals, who terrorised 13th century India moving from town to town, looting and pillaging and “piracy” on the high seas, and highwaymen and banditry to the pre-industrial world what organised crime is to modern society. Many of today’s leading organised criminal gangs also have long histories, many tracing their origins back to feudal times, retaining links and codes from a bygone era whilst at the same time modernising and expanding their operations far beyond their traditional roots from their homelands across the world.

Whilst prohibition on alcohol in the US was presented as a victory for public morals and health, it was to prove a temporary measure being repealed in 1933.

I like to think of “Red Alert” as an 800 page plus private travel guide through the teeming jungle of crimes, risks, regions, countries, criminals, terrorists, cases, banking products and services, laws, standards and regulations, & programme design relating to the complex work of financial crime.

Financial crime fighters face an increasingly difficult task, and an environment that is complex and dynamic. as such learning holds the key to success and will provide its own rewards. as Benjamin Franklin once said, “For the best return on your money, pour your purse into your head.”

As you read “Red Alert” either from the start to the finish, or by focussing on particular areas of interest consider the words of Confucius, who said, “Learning without thought is labour lost; thought without learning is perilous.”

Seventy years ago, this week, the United Nations Convention for the Suppression of the Traffic...

Publishing FCN 3

When I started Financial Crime News, I wanted to offer a digestible collection of both interesting and relevant materials to arm financial crime fighter’s with additional tools to help enable them to do their work. Read more…

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